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False advertising suits over outlet prices continue

Demonstrating the hot new trend in false advertising consumer class action, Columbia Sportswear Company was hit with a deceptive pricing suit in California federal court.

Jeanne and Nicolas Stathakos claimed the outerwear company overstated the “Former Price” listed on price tags at its outlet stores. The complaint stated that “Based on the represented price reduction, reasonable consumers would believe that Columbia is offering bona fide discounts off of true former prices.” “But the ‘Former Price’ represented by Columbia was a sham.”

The goods sold at Columbia outlet stores are manufactured for exclusive sale at that location, the plaintiffs said, and were never sold—or even intended to be sold—at the “Former Price” advertised on the price tags and the tags were designed to falsely convince consumers that they are buying brand products at reduced prices and not “lower quality goods.”

“To put it simply, one may pay $30,000 for a Prius and $100,000 for a Tesla, but no reasonable consumer would understand himself to have ‘saved’ $70,000 by buying a Prius,” the suit claimed. “Rather, he has simply chosen to buy a different car.”

For example, during a July visit to the Vacaville, Calif. Columbia outlet, the Stathakos’s purchased six items, including a pair of women’s shorts with a “Former Price” of $30 and an actual price of $14.97, believing they saved approximately 50 percent on their purchase.

Such “phantom markdowns” violate Federal Trade Commission’s regulations as well as California state law, the suit said. Specifically, Section 17501 of the state’s Business & Professions Code states: “No price shall be advertised as a former price of any advertised thing, unless the alleged former price was the prevailing market price … within three months next immediately preceding the publication of the advertisement or unless the date when the alleged former price did prevail is clearly, exactly and conspicuously stated in the advertisement.”

The “Former Price” listed on price tags at Columbia outlet stores did not reflect a prevailing market retail price from the prior three months, the plaintiffs alleged.

Seeking to represent a class of California plaintiffs, the complaint requested injunctive relief and restitution for violations of California’s False Advertising Law, Consumers Legal Remedies Act, and the unfair, fraudulent, and unlawful prongs of the state’s Unfair Competition Law.

Why it matters: The Stathakos complaint noted that the shift from using outlet stores as a means to sell-out-of season or damaged full-price inventory to a destination for goods manufactured solely for sale at the outlet has triggered both consumer class action suits and a letter from four members of Congress requesting that the FTC investigate misleading marketing practices by outlet stores in the country.